Low participation, irrational investment, and high volatility of stock prices are considered to be typical in China stock market. According to the abovementioned stylized facts, we describe a attentional contagion mechanism underlying the inflow of new investors in a simple asset pricing model and find that that investor attention plays a dual role in the formation of asset prices. On one hand, the limited attention of investors causes the under-reaction to information and price momentum. On the other hand, the attentive investors induce the inexperienced positive-feedback investors to participate the market, which brings about return reversal. As a result, the introduction of attentional contagion mechanism explains the co-existence of momentum and reversal, which sheds light on the understanding of the seperated pricing effects of investor attention on developed and emerging stock markets around the world.
PENG Die-feng, RAO Yu-lei, LEI Xiang-yuan
. A Unified Model of Momentum and Reversal in Stock Markets Based on Attention Contagion Mechanism[J]. Chinese Journal of Management Science, 2015
, 23(5)
: 32
-40
.
DOI: 10.16381/j.cnki.issn1003-207x.2015.05.005
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